For its second quarter, which ended June 30, Arista reported revenues of $137.9 million — 65 percent higher than the $83.5 million reported for the second quarter last year. Analysts were expecting year-over-year growth of more like 50 percent.
Of course, Arista is still profitable, too. Second-quarter net income was $21.6 million, or 34 cents per diluted share. For its second quarter a year ago, Arista reported net income of $10.3 million; per-share earnings for that quarter aren’t listed in Arista’s SEC filings.
Non-GAAP net income for the second quarter was $23.7 million, or 35 cents per share. Analysts were expecting just 13 cents per share, Barron’s reported.
Arista shares were up $5.48 (7.6%) at $77.70 in early after-hours trading.
Teaming Up With VMware
During Thursday’s earnings call, Arista announced a partnership with VMware that spans VMware’s major platforms, including ESX, vSphere, vCloud and the NSX network virtualization platform. Arista will also be working with VMware in areas such as OpenStack and OVSDB.
This isn’t particularly a surprise. Arista was one of several switch vendors that announced support for NSX when the platform was announced last year. And it never seemed likely Arista would team up with the SDN strategy of a competing switch vendor, least of all Cisco and its Application-Centric Infrastructure (ACI).
Things to Worry About
Hanging over all this happy news is a lawsuit by Optumsoft, a startup founded by David Cheriton, one of Arista’s founders. The companies have exchanged court complaints stemming from the development of Arista’s EOS software.
During the call with analysts, Arista CFO Kelyn Brannon noted that the Optumsoft litigation had been delayed, meaning the associated legal expenses were pushed into future quarters — giving Arista a small boost in its second-quarter results.
Another note of concern is that Microsoft represented 22 percent of revenues last year. Arista didn’t offer an update on this situation, other than to say that for the second quarter, only one customer represented as much as 10 percent of revenues. Arista thinks Microsoft’s share will stay flat this year but will eventually fall into “the teens” in the long term, Brannon said on the call.
“We’ve … said that 2013 was a peak year for Microsoft in terms of their capex as well as for Arista in deploying into Microsoft Azure,” CEO Jayshree Ullal said on the call.
The company now claims to have 2,700 customers and adding them at an average of “one or two a day,” up from one per day last year, Ullal said.
One possible point to watch is that Arista will be putting time and money into trying to expand internationally. The Americas represented 74.8 percent of revenues during the second quarter.